SHANGHAI — After the peppered-beef carpaccio and before the pan-fried sea bass, there were raucous toasts and the clinking of wine glasses in the VIP room of New Heights, a jazzy restaurant in this city's most luxurious location, overlooking the Bund.

Wang Guangyi, one of China's pioneering contemporary artists, was there. So were Zhang Xiaogang, Fang Lijun, Yue Minjun, Zeng Fanzhi and 20 other well-known Chinese artists and their guests, many of whom had been flown in from Beijing to celebrate the opening of a solo exhibition of new works by Zeng Hao, another rising star in China's bubbly art scene.

"We've had opening dinners before," said the Shanghai artist Zhou Tiehai, sipping Chilean red wine, "but nothing quite like this until very recently."

The dinner, held on a recent Saturday night in a restaurant located on the top floor of a historic building that also houses an Armani store and the Shanghai Gallery of Art, was symbolic of the soaring fortunes of Chinese contemporary art.

In 2006, Sotheby's and Christie's, the world's biggest auction houses, sold $190 million worth of Asian contemporary art, most of it Chinese, in a series of record-breaking auctions in New York, London and Hong Kong. In 2004, the two houses combined sold $22 million in Asian contemporary art.

The climax came at a Beijing auction in November, when a painting by Liu Xiaodong, 43, sold to a Chinese entrepreneur for $2.7 million, the highest price ever paid for a piece by a Chinese artist who began working after 1979, when loosened economic restrictions spurred a resurgence in contemporary art.

That price put Liu in the company of the few living artists, including Damien Hirst and Jeff Koons, whose works have sold for $2 million or more at auction.

"This has come out of nowhere," said Henry Howard-Sneyd, global head of Asian arts at Sotheby's, which, like Christie's, has just started a division focusing on contemporary Chinese art.

With auction prices soaring, hundreds of new studios, galleries and private art museums are opening in big cities like Beijing and Shanghai. Chinese auction houses that once specialized in traditional ink paintings are now putting contemporary, experimental artworks on the block.

Western galleries, especially in Europe, are rushing to sign up unknown painters; artists a year out of college are selling photographic works for as much as $10,000 each; well- known painters have yearlong waiting lists; and the Solomon R. Guggenheim Museum and the Georges Pompidou Center in Paris are considering opening branches in China.

"What is happening in China is what happened in Europe at the beginning of the 20th century," said Michael Goedhuis, a collector and art dealer specializing in Asian contemporary art who has galleries in London and New York. "New ground is being broken. There's a revolution under way."

But the auction frenzy has also sparked debate here about whether sales are artificially inflating prices and encouraging speculators, rather than real collectors, to enter the art market.

Auction houses "sell art like people sell cabbage," said Weng Ling, the director of the Shanghai Gallery of Art. "They are not educating the public or helping artists develop. Many of them know nothing about art."

But the boom in Chinese contemporary art — reinforced by record sales in New York last year — has also brought greater recognition to a group of experimental artists who grew up during China's brutal Cultural Revolution, which lasted from 1966 to 1976.

After the 1989 government crackdown in Tiananmen Square, avant- garde art was often banned from being shown here because it was deemed hostile or anti-authoritarian. Throughout the 1990s, many artists struggled to earn a living, considering themselves lucky to sell a painting for $500.

That has all changed. These days, China's leading avant-garde artists have morphed into multimillionaires who show up at exhibitions wearing Gucci and Ferragamo. Wang Guangyi, best-known for his Great Criticism series of Cultural Revolution-style paintings emblazoned with the names of popular Western brands, like Coke, Swatch and Gucci, drives a Jaguar and owns a 10,000-square-foot luxury villa on the outskirts of Beijing.

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Yue Minjun, who makes legions of colorful smiling figures, has a walled-off suburban-Beijing compound with an 8,000-square-foot home and studio. Fang Lijun, a "cynical realist" painter whose work captures artists' post-Tiananmen disillusionment, owns six restaurants in Beijing and operates a small hotel in southwestern China's Yunnan Province.

If the Chinese art scene can be likened to a booming stock market, Zhang Xiaogang, 48, is its Google. More than any other Chinese artist, Zhang, with his huge paintings evoking family photographs taken during the Cultural Revolution, has captured the imagination of international collectors. Prices for his work have skyrocketed at auction over the past two years.

When his work "Bloodline Series: Comrade No. 120" sold for $979,000 at a Sotheby's auction in March, many art insiders predicted that the market had topped out and prices would plummet within months.

But in October, the British collector Charles Saatchi bought another of Zhang's pieces at Christie's in London, for $1.5 million. Then in November, at a Christie's Hong Kong auction, Zhang's 1993 "Tiananmen Square" sold to a private collector for $2.3 million.

Are such prices justified? Uli Sigg, the former Swiss ambassador to China and perhaps the largest collector of Chinese contemporary art, with more than 1,500 pieces, calls the market frothy but not finished.

"I don't see anything at the moment that will stop the rise in prices," he said. "More and more people are flocking to the market."

Goedhuis insists that this is the beginning of an even bigger boom in Chinese contemporary art.

"I don't think there's a bubble," he said. "There's a lot of speculation but no bubble. That's the paradox. In China there are only a handful of buyers — 10, 20, 30 — out of a billion people. You only need another 10 to come in and that will jack up prices."

He added: "Another astonishing fact is there is not a single museum in the West that has committed itself to buying Chinese art. It's just starting to happen. Guggenheim, the Tate Modern, MoMA, they're all looking."

Representatives from those museums, as well as others, have made scouting missions to China. A growing number of international collectors are looking at Chinese art too.

"After the 2005 Sotheby's show, I just jumped in," said Didier Hirsch, a French-born business executive in California who has long collected American and European contemporary art. "People said the next big run-up in prices would be at Sotheby's in March, so I said, 'Now or never.'" Hirsch purchased nearly his entire collection — about 40 works — by phone after doing research on the Internet. He said that he went first for what he called the titans — the original group of post-'79 painters — including Wang Guangyi and Liu Xiaodong.

Some critics here say that the focus on prices has led to a decline in creativity as artists knock off variations of their best-known works rather than explore new territory. Some are even employing teams of workers, in assembly- line fashion.

Christopher Phillips, a curator at the International Center of Photography in New York, has become a regular visitor to China. He said of a recent trip to the studio of a well-known painter: "The artist wasn't there, but I saw a group of canvases being painted by a team of young women who seemed to be just in from the countryside. I found it a little disconcerting."

And many experts in China say that some gallery officials and artists are sending representatives to the auctions to bid on their own works in order to prop up prices, or "protect" the prices of some rising stars.

But Lorenz Helbling, director of the ShanghART Gallery in Shanghai, said that Chinese artists continue to produce an impressive array of works, and that talk about the market being overrun by commercialism is exaggerated.

"Things are much better than they were 10 years ago," he said. "Back then, many artists were commissioned to simply paint dozens of paintings for a gallery owner, who went out and sold those works. Now these artists are thinking more deeply about their work because they're finally getting the recognition they deserve."